Testimony of George A. Schutter on B21-0064 Community Impact Fund

Tuesday, November 10, 2015

Good afternoon, Chairman Mendelson and members of the Committee of the Whole. I am George A. Schutter, Chief Procurement Officer of the District of Columbia and Director of the Office of Contracting and Procurement. Today, I will offer testimony on behalf of the Executive about the proposed bill 21-0064, DC Community Impact Fund of 2015.

While I believe the bill was well intentioned, it creates a number of concerns, namely: the strategy for administration is unclear; the proposed purpose of these funds to “support social benefit programs and enhance employment opportunities for District citizens,” overlaps with existing programs at several District agencies; and lastly, the business and non-profit community will be significantly impacted by the implementation of this fund.

The administrative burden of calculating the target “vendor contribution” could potentially create more bottlenecks in the payment process which is an issue that currently causes angst among businesses that have or will seek contracts with the District. Also, there is no clearly identified owner in the executive or the legislative for this fund. As currently outlined, there is both an oversight board with members from the executive and legislative branches, as well as a board of directors comprised of members of industry that will drive the investments. The bill does not clearly identify the intent of the investments or how they will ultimately benefit the residents of the District.

Several District agencies already have programs geared toward employment opportunities for District citizens. For example, the Department of Employment Services has the Project Empowerment program, which is a transitional employment program that provides job readiness training, work experience, and job search assistance to District residents who face multiple barriers to employment. The Department of Human Resources also facilitates the Residents for Hire Program to recruit, develop, and retain unemployed and underemployed District of Columbia residents within District of Columbia Government agencies to perform work that would otherwise be conducted by contractors. Rather than fill these positions with temp agency employees, the RHP program works to employ DC residents with these temp and temp-to-hire positions.

The bill requires a one percent fee to be paid by for-profit and not-for-profit entities out of the gross margin they charge other customers. This is unrealistic. For example, in the case of not-for-profits, they do not typically have gross margins or profit. In the case of for-profits, it would be difficult to determine the origin of the fee on a contract-by-contract basis, particularly in fixed price contracts. In short, we can expect that vendors will pass this fee back to the District through higher prices for goods, services, and construction services.

Lastly, this will be especially difficult to enforce for those contracts, grants and programs completely funded by federal monies or those that receive a match from the federal government. Often times there is a set formula for disbursement of these funds and how they are to be used. As currently written, there are no exceptions based on funding source, or organizational type. For the non-profit organizations that receive grants from the District, any reduction in the award impedes their ability to do the important work that improves the quality of life for thousands of District residents. For example, the Office of Victim Services and Justice Grants issues approximately $16 million in grants each fiscal year, primarily to non-profit organizations, who facilitate impactful work in the community around victim services, violence prevention, and criminal justice improvement. If implemented as proposed, we could run the risk of losing the District’s federal match that fund these critical programs.

In closing, I do not think that the Community Impact Fund is beneficial to the District as it duplicative of existing District programs and will increase costs to the District. This concludes my prepared testimony. Thank you for the opportunity to testify and I am happy to answer any questions you may have.